Law Blog Q&A: Sun Microsystems GC Mike Dillon

Mike Dillon, is the general counsel for Sun Microsystems. Last August he launched his own blog, joining more than 3,000 fellow Sun employees who have their own blogs, including CEO Jonathan Schwartz. We caught up with Dillon earlier today to talk about patent trolls, Microsoft, etc.

You recently wrote about so-called patent trolls and the problems they’re causing for Sun. Talk a little bit about that.

Part of what I’m trying to do is help our legislative bodies and shareholders to understand the tremendous amount of waste these patent trolls cause. When you look at the number of patent cases that are filed on a weekly basis it’s quite astounding. To be candid, Sun has not traditionally faced a huge number of patent trolls. But if you look at what is happening across the industry collectively, it amounts to an enormous tax on the innovative abilities of these companies.

How do these cases affect Sun?

We’re going to have to hire outside counsel, spool up our engineering community to focus on the alleged inventions, and devote management time and resources to handling these cases. So that’s expensive. And that’s money that can otherwise be spent on innovation and returning value to our customers and shareholders.

Some people, like former Microsoft big wig Nathan Myhrvold, defend the rights of patent-holding companies, arguing that without full rights there is no way for small inventors to get big infringers to the table to settle. How do you respond to that?

The area of software patents is where you see most of the troll activity. Twenty years ago you weren’t able to patent software. As a result of the dot com crash, you see software patents out there that are being bought up for no other purpose than to derive revenues from companies. These aren’t inventors but are mostly lawyers and investors seeking a quick return. These patents in most cases are not being used to create products and innovation which is what our Founding Fathers had in mind when they established the patent system.

Look at what happened with securities litigation 15 years ago. There were a number of securities firms that used the laws to their favor. Every time there was a dip in stock price or a restatement, a suit was filed, usually in a difficult jurisdiction and without any notice. Those laws have been tightened and as a result the number of securities litigation cases has decreased. We have almost the same type of situation now with patents. You have a large number of patents that are out there on the market and the plaintiffs lawyers are using that and some looseness in the patent laws to extract the same type of settlements. They’re trying to drag companies into court and get a lot of publicity, so a company will settle, and then they’ll use that settlement as leverage for the next company they sue.

In a recent interview, Microsoft’s lawyers claimed that members of the open-source software community are infringing upon their patent portfolio. On his blog, Sun’s CEO Jonathan Schwartz said Microsoft should listen to its customers rather than threaten them with litigation. What do you think?

To me, all the focus on what Microsoft said and how the open source world is reacting is not the real interesting thing. If you look at what’s happening in the world of intellectual property and software licensing, there’s an enormous change that’s occurred a shift from the proprietary to the world of open source. There are three types of companies now. There are new companies that are created in this open source environment. There are existing companies that recognize the change and are making a shift. And then there’s a third category of companies that fight the change that’s occurring in the world. Their business model is dependent on the old world and they are resistant to change.

You see Microsoft in that third category of companies?

It appears that way. I don’t know why Microsoft is making the decisions that they are.

It’s commencement time at law schools around the country. Any words of advice for the law school graduates?

About Law Blog

The Law Blog covers the legal arena’s hot cases, emerging trends and big personalities. It’s brought to you by lead writer Jacob Gershman with contributions from across The Wall Street Journal’s staff. Jacob comes here after more than half a decade covering the bare-knuckle politics of New York State. His inside-the-room reporting left him steeped in legal and regulatory issues that continue to grab headlines.

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